Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Automatic Data Processing Inc. (NASDAQ:ADP)

Analysis of Goodwill and Intangible Assets

Advanced level


Goodwill and Intangible Asset Disclosure

Automatic Data Processing Inc., balance sheet: goodwill and intangible assets

US$ in thousands

Microsoft Excel LibreOffice Calc
Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015
Software and software licenses 2,719,100  2,519,300  2,292,900  1,975,200  1,811,600  1,648,700 
Customer contracts and lists 1,021,200  860,700  708,600  614,100  603,700  625,400 
Other intangibles 239,200  237,900  236,500  228,200  207,800  209,000 
Intangible assets, gross 3,979,500  3,617,900  3,238,000  2,817,500  2,623,100  2,483,100 
Accumulated amortization (2,763,700) (2,546,400) (2,351,600) (2,197,300) (2,088,900) (1,979,900)
Intangible assets, net 1,215,800  1,071,500  886,400  620,200  534,200  503,200 
Goodwill 2,309,400  2,323,000  2,243,500  1,741,000  1,682,000  1,793,500 
Goodwill and intangible assets, net 3,525,200  3,394,500  3,129,900  2,361,200  2,216,200  2,296,700 

Based on: 10-K (filing date: 2020-08-05), 10-K (filing date: 2019-08-09), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07).

Item Description The company
Intangible assets, net Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Automatic Data Processing Inc.’s intangible assets, net increased from 2018 to 2019 and from 2019 to 2020.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Automatic Data Processing Inc.’s goodwill increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.
Goodwill and intangible assets, net Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Automatic Data Processing Inc.’s goodwill and intangible assets, net increased from 2018 to 2019 and from 2019 to 2020.

Adjustments to Financial Statements: Removal of Goodwill

Automatic Data Processing Inc., adjustments to financial statements

US$ in thousands

Microsoft Excel LibreOffice Calc
Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015
Adjustment to Total Assets
Total assets (as reported) 39,165,500  41,887,700  37,088,700  37,180,000  43,670,000  33,110,500 
Less: Goodwill 2,309,400  2,323,000  2,243,500  1,741,000  1,682,000  1,793,500 
Total assets (adjusted) 36,856,100  39,564,700  34,845,200  35,439,000  41,988,000  31,317,000 
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) 5,752,200  5,399,900  3,459,600  3,977,000  4,481,600  4,808,500 
Less: Goodwill 2,309,400  2,323,000  2,243,500  1,741,000  1,682,000  1,793,500 
Stockholders’ equity (adjusted) 3,442,800  3,076,900  1,216,100  2,236,000  2,799,600  3,015,000 

Based on: 10-K (filing date: 2020-08-05), 10-K (filing date: 2019-08-09), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07).


Automatic Data Processing Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

Automatic Data Processing Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015
Total Asset Turnover
Reported total asset turnover 0.37 0.34 0.36 0.33 0.27 0.33
Adjusted total asset turnover 0.40 0.36 0.38 0.35 0.28 0.35
Financial Leverage
Reported financial leverage 6.81 7.76 10.72 9.35 9.74 6.89
Adjusted financial leverage 10.71 12.86 28.65 15.85 15.00 10.39
Return on Equity (ROE)
Reported ROE 42.88% 42.46% 46.85% 43.59% 33.30% 30.21%
Adjusted ROE 71.64% 74.52% 133.28% 77.52% 53.31% 48.18%
Return on Assets (ROA)
Reported ROA 6.30% 5.47% 4.37% 4.66% 3.42% 4.39%
Adjusted ROA 6.69% 5.80% 4.65% 4.89% 3.55% 4.64%

Based on: 10-K (filing date: 2020-08-05), 10-K (filing date: 2019-08-09), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Automatic Data Processing Inc.’s adjusted total asset turnover ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Automatic Data Processing Inc.’s adjusted financial leverage ratio decreased from 2018 to 2019 and from 2019 to 2020.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Automatic Data Processing Inc.’s adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Automatic Data Processing Inc.’s adjusted ROA improved from 2018 to 2019 and from 2019 to 2020.

Automatic Data Processing Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015
As Reported
Selected Financial Data (US$ in thousands)
Revenues 14,589,800  14,175,200  13,325,800  12,379,800  11,667,800  10,938,500 
Total assets 39,165,500  41,887,700  37,088,700  37,180,000  43,670,000  33,110,500 
Activity Ratio
Total asset turnover1 0.37 0.34 0.36 0.33 0.27 0.33
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Revenues 14,589,800  14,175,200  13,325,800  12,379,800  11,667,800  10,938,500 
Adjusted total assets 36,856,100  39,564,700  34,845,200  35,439,000  41,988,000  31,317,000 
Activity Ratio
Adjusted total asset turnover2 0.40 0.36 0.38 0.35 0.28 0.35

Based on: 10-K (filing date: 2020-08-05), 10-K (filing date: 2019-08-09), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07).

2020 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= 14,589,800 ÷ 39,165,500 = 0.37

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 14,589,800 ÷ 36,856,100 = 0.40

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Automatic Data Processing Inc.’s adjusted total asset turnover ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015
As Reported
Selected Financial Data (US$ in thousands)
Total assets 39,165,500  41,887,700  37,088,700  37,180,000  43,670,000  33,110,500 
Stockholders’ equity 5,752,200  5,399,900  3,459,600  3,977,000  4,481,600  4,808,500 
Solvency Ratio
Financial leverage1 6.81 7.76 10.72 9.35 9.74 6.89
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Adjusted total assets 36,856,100  39,564,700  34,845,200  35,439,000  41,988,000  31,317,000 
Adjusted stockholders’ equity 3,442,800  3,076,900  1,216,100  2,236,000  2,799,600  3,015,000 
Solvency Ratio
Adjusted financial leverage2 10.71 12.86 28.65 15.85 15.00 10.39

Based on: 10-K (filing date: 2020-08-05), 10-K (filing date: 2019-08-09), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07).

2020 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= 39,165,500 ÷ 5,752,200 = 6.81

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 36,856,100 ÷ 3,442,800 = 10.71

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Automatic Data Processing Inc.’s adjusted financial leverage ratio decreased from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015
As Reported
Selected Financial Data (US$ in thousands)
Net earnings 2,466,500  2,292,800  1,620,800  1,733,400  1,492,500  1,452,500 
Stockholders’ equity 5,752,200  5,399,900  3,459,600  3,977,000  4,481,600  4,808,500 
Profitability Ratio
ROE1 42.88% 42.46% 46.85% 43.59% 33.30% 30.21%
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Net earnings 2,466,500  2,292,800  1,620,800  1,733,400  1,492,500  1,452,500 
Adjusted stockholders’ equity 3,442,800  3,076,900  1,216,100  2,236,000  2,799,600  3,015,000 
Profitability Ratio
Adjusted ROE2 71.64% 74.52% 133.28% 77.52% 53.31% 48.18%

Based on: 10-K (filing date: 2020-08-05), 10-K (filing date: 2019-08-09), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07).

2020 Calculations

1 ROE = 100 × Net earnings ÷ Stockholders’ equity
= 100 × 2,466,500 ÷ 5,752,200 = 42.88%

2 Adjusted ROE = 100 × Net earnings ÷ Adjusted stockholders’ equity
= 100 × 2,466,500 ÷ 3,442,800 = 71.64%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Automatic Data Processing Inc.’s adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015
As Reported
Selected Financial Data (US$ in thousands)
Net earnings 2,466,500  2,292,800  1,620,800  1,733,400  1,492,500  1,452,500 
Total assets 39,165,500  41,887,700  37,088,700  37,180,000  43,670,000  33,110,500 
Profitability Ratio
ROA1 6.30% 5.47% 4.37% 4.66% 3.42% 4.39%
Adjusted for Goodwill
Selected Financial Data (US$ in thousands)
Net earnings 2,466,500  2,292,800  1,620,800  1,733,400  1,492,500  1,452,500 
Adjusted total assets 36,856,100  39,564,700  34,845,200  35,439,000  41,988,000  31,317,000 
Profitability Ratio
Adjusted ROA2 6.69% 5.80% 4.65% 4.89% 3.55% 4.64%

Based on: 10-K (filing date: 2020-08-05), 10-K (filing date: 2019-08-09), 10-K (filing date: 2018-08-03), 10-K (filing date: 2017-08-04), 10-K (filing date: 2016-08-05), 10-K (filing date: 2015-08-07).

2020 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × 2,466,500 ÷ 39,165,500 = 6.30%

2 Adjusted ROA = 100 × Net earnings ÷ Adjusted total assets
= 100 × 2,466,500 ÷ 36,856,100 = 6.69%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Automatic Data Processing Inc.’s adjusted ROA improved from 2018 to 2019 and from 2019 to 2020.